Buyers Uncertain About Compliance

This could be an opportunity for staffing firms

Question:

You hear a lot about independent contractor misclassification. Exactly how big an issue is this for buyers and what are the opportunities for staffing firms?

Answer:

We surveyed buyers asking what percent of their workers were properly classified. Incredibly, about a quarter of them said they had no idea whether their workers were properly classified; another 62 percent said that at least some of their workers were probably misclassified; and only 13 percent were confident that all their independent contractors were within the law.

Additionally, 40 percent of buyers reported that their independent contractor pools have audited by an outside agency — typically by the IRS — within the last six months. So the risk for them is high.

Buyers’ uncertainty over whether their workers are properly classified represents a big opportunity for staffing firms to provide independent contractor compliance services. Also, this risk makes a good case for the use of temporary staffing, which is already within the law.

Editors at SI Review

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VP

We frequently hear from clients that getting their arms around their independent contractor workforce is a challenge. In many cases, the use of independent contractors is done locally in an organization and is not done consistently across the organization. Local hiring managers, who are typically not experts on compliance, are left to themselves to structure engagements. This leaves the organization in a position of unknown risk in the face of an audit.

There are solutions available today that deliver comprehensive independent contractor compliance across the organization. Implementing a comprehensive solution ensures that there is a uniform compliance process for independent contractors, consolidated visibility into independent contractor spending, opportunities for streamlined procurement workflows, etc. (Disclosure: this is a core business solution we offer at ICon.)

VP

Your stats support what we have heard from our clients and the pressure is increasing as legislation is passed and the states add their scrutiny. By adding a compliance service to the existing staffing program, providers add value and create loyal advocates in the legal and procurement departments. One point I have to comment on is the statement, "this risk makes a good case for the use of temporary staffing, which is already within the law". Although temporary staffing may be within the law, many independent contractors are consultants and functionally are more aligned with being a vendor or professional services provider. They resist being temporary employees because it dilutes the true value of their professional expert knowledge and makes it difficult for them to be legitimate businesses. We find that up to 50% of professional service contractors see themselves as self-employed and need a business relationship with their client to be satisfied with their engagements. The bigger issue is that many companies make it difficult to engage these consultants because they put policies in place, designed to protect themselves, that make it prohibitive. In these cases the consultants tend to get hidden under other vendor agreements and make transparency difficult. It also tends to add a layer of cost that adds no value. There are solutions like the MBO Enterprise Solution that aggregates these professionals under a compliant engagement model that is IC-friendly and allows them to continue to build their consultancies. The risk of misclassification is real but the risk of losing access to this talent is even greater if their only option is a staffing solution.

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